Summary of Unfair Competition Regulations in Russia

Date: 30 March 2016

Unfair competition matters are handled in Russia by the Federal Antimonopoly Service (FAS) and Arbitrazh (commercial) courts which are official judicial bodies, not to be confused with arbitration (private) courts.

It is possible to file a claim against an unfair competitor either with the FAS or with the court. The FAS handles such matters through administrative procedure, while the court puts them on trial. In the latter case the court must notify the FAS to ensure the possibility of its partaking in the trial.

National laws on unfair competition in Russia differ from the respective regulations of Paris Convention. In accordance with Art. 10bis (2) of the Convention any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.

At the same time, item 9 of Art. 4 of the Federal Law on Protection of Competition (hereinafter the Law) sets forth that unfair competition is any actions of an enterprise entity (group of persons) which are
[1] aimed at obtaining advantages in relation to entrepreneurial activities,
[2] contradict the legislation of the Russian Federation, [or] usual business practice, [or] orders of well-doing, rationality or fairness, and
[3.1] have inflicted or may inflict losses to other enterprise entities [4] competitors, or
[3.2] have caused or may cause damage to their business reputation.
[Authors note there is no structuring by numbers in the text of the Law.]

The numbers above represent the mandatory elements of an act of unfair competition according to the Law, including 4 the claimant whose rights have been violated by the unfair competitor shall prove the presence of the competitive relations.

Obviously, the Law gives the FAS much less freedom in deciding whether a certain act may be deemed unfair competition, in comparison to the Paris Convention. Furthermore, the particular forms of unfair competition are in similar way different when comparing the Law and the Convention.

Art. 10bis (3) of the Paris Convention states that the following in particular shall be prohibited:

(i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;
(ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;
(iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.
Those provisions are rather wide in scope which allows for identifying the unfair competition on a case-by-case basis. In Russia, the Law makes those provisions more restrictive. According to the Law, forms of unfair competition may be divided into three general groups.

1. The first group (sub-points 13, point 1, Art. 14 of the Law), which is not directly related to intellectual property issues, includes (1) defaming competitors, (2) misleading consumers or (3) incorrect advertising. The language of the Law is as follows:

(1) dissemination of false, inaccurate, or distorted information which may inflict losses to an enterprise entity or cause damage to its business reputation;
(2) misleading [consumers] in relation to nature, method and place of production, application properties, quality and quantity of goods or in relation to its manufacturers;
(3) incorrect comparison by the enterprise entity of the goods, which it produces or sells, with the goods, which are produced or sold by other enterprise entities.

2. The second group (s-p. 5, p. 1, Art. 14 of the Law) relates to protected secrets and includes unlawful gathering, using, disclosure of information comprising commercial, business or any other legally protected secret. It should be noted that currently there is no notable examples of enforcing protected secrets via unfair competition actions in Russia.

3. The third group directly relates to intellectual property rights, and is regulated by the following two provisions of the Law.

3.1. According to s-p. 4, p. 1, Art. 14 of the Law another form of unlawful competition is selling, exchanging or any other introduction of goods into the stream of commerce, in case it is connected with unlawful use of results of intellectual activity and equated means of individualization of a legal entity, [or] means of individualization of products, activities or services.

Important thing to keep in mind here is that the proprietor may freely choose whether to enforce his rights on the basis of unfair competition legislation, or to protect his rights to the intellectual property matters in regular order by filing an administrative complaint with the police, or a lawsuit with the court, or both.

3.1.1. If the FAS recognizes the unfair competition, it shall oblige the violator to cease the according activity. In case of non-complying, the possible outcome for the infringer is:
for an individual entrepreneur fine from 10,000 to 20,000;
for a company fine from 100,000 to 300,000.

Also, on the basis of the Decision of the FAS, an administrative proceeding concerning the fact of unfair competition may be initiated which results in:
for an individual entrepreneur fine of 20,000 or disqualification for up to 3 years;
for a company fine up to 15% of the revenues from selling the goods but not less than 100,000.

3.1.2. If an administrative complaint is filed with the police the possible results may vary depending on the particulars of the infringement, including administrative fine, confiscation of the goods or even criminal liability.

3.1.3. If a lawsuit is filed with the court related to violation of IP rights, the plaintiff is able, inter alia, to claim losses or compensation as per the IP laws.

3.2. In accordance with p. 2 of Art. 14 of the Law it is not allowed [to perform acts of] unfair competition related to obtaining and using the exclusive right to means of individualization of a legal entity, [or] means of individualization of products, activities or services. In regard to this provision, it is possible to separate three different scenarios.

3.2.1. Obtaining the right to a corporate name

In case obtaining a corporate name is considered by the FAS as an act of unfair competition, the FAS can order the infringer to either change its company name, or to restrict its use in a particular way. The FAS, however, cannot require that the violator company is liquidated. If the violator refuses to comply with the order, the same penalty may be applied as in the first paragraph of point 3.1.1 above.

3.2.2. Obtaining the right to a trademark, service mark or an appellation of origin of goods

If the FAS issues a Decision where obtaining a trademark, etc. is considered an act of unfair competition, the party in interest may pass the Decision to the intellectual property office (Rospatent) who then cancels the trademark which mitigates legal effects of its registration in the first place.

3.2.3. Using the right to a corporate name, trademark, service mark or an appellation of origin

The idea of point 3.2.3 is generally similar to the point 3.1.1 above. The difference is that it is not applied to results of intellectual activity (including inventions, utility models, designs, copyright subject matters, etc.) and at the same time it can be connected not only with putting goods on the market, but with use in general.

The practical difference is possible punishment of the violator in case the administrative proceeding is initiated on the basis of the Decision of the FAS:
for an individual entrepreneur fine from 12,000 to 20,000;
for a company fine from 100,000 to 500,000.

Finally, any of the above Decisions of the FAS may be challenged in the court. Generally, the court having the respective jurisdiction would be a territorial Arbitrazh court of trial. However, the Decisions of the FAS made under point 3.2.2 above fall under the special competence of the Court for Intellectual Property Rights which is a specialized Arbitrazh court based in Moscow.

Author: Alexander Baranchikov, Lead Lawyer, RUPTO Attorney 1719

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